9 In calculating the current ratio which item would not be i

9. In calculating the current ratio which item would not be included. a. equipment b. accounts payable c. accounts receivable d. short term investments

Solution

Current Ratio = Current Assets / Current Liabilities.

Thus, every element of current assets and Liabilities has to be included in the calculation.

Accounts receivable and payable are categorised under current assets and current Liabilities respectively. Short term investment also has high liquidity and is also categorised under Current Assets. Thus these must be included in calculating current ratio.

Only Equipment is neither a Current Asset or Liability. It is a non monetary asset and is categorised under Fixed assets. Thus, Equipments will not come in the calculation of Current Ratio. Option A.